We've previously discussed the financial impact of this trend on
Google (summarized below). What we haven't discussed is the
impact on Yahoo, Microsoft, Ask, and other players. In a word?
Disaster... ---JUMP--- IMPACT ON GOOGLE

If the search share patterns match those of the auction,
operating system, and other monopoly markets (eBay, Microsoft),
Google would end up with about 90% share worldwide. Network
effects are less pronounced in search than in auctions, however,
so we expect Google will probably end up with about 80% share.
(According to
ReadWriteWeb, however, Google already has 90% search share in
France, so 90% is not inconceivable.)

What would Google's ascendancy to 80% share mean in terms of
dollars? So far, we've only calculated the value of US search
share points, but here they are:

Google generated $2.7 billion in "Google Sites" revenue in Q3.
Most of this came from search, and about half of it ($1.4
billion) came from the U.S. Each of Google's 65 search "points,"
therefore, generated about $22 million of quarterly revenue, or
$86 million annually. For simplicity's sake, call it $100 million
per year per point.

As Google's algorithms get more efficient, it will likely
continue to generate more revenue per search point, but the point
here is that the amount it can gain from search share
gains is finite (even internationally). Specifically, in the
U.S., at the current rate of revenue per query, Google can gain
between $500 million (70% share) and $2.5 billion (90% share)
before its search share gains are maxed out.

Those numbers represent an increase of about 10% to 40% on top of
Google's current U.S. search business. Based on anecdotal reports
from other countries, Google may have even less headroom
internationally.

IMPACT ON YAHOO

Per Comscore, Yahoo is clinging to 21% share in the US. For
perspective, in France, where No. 2 player Yahoo had five years
to build up a lead on Google, Yahoo now has only 3% share (in
August). We won't do the math 21% to 3% revenue math, but
considering that search probably contributes half of Yahoo's
revenue and more than half of its profit, this result would be
devastating.

A decline of Yahoo's US share to 3% would be shocking.
Inasmuch as Yahoo has not proven that it can stem the share
bleed, however, it is not just reasonable to assume that Yahoo is
headed to less than 10% share. It's prudent.

IMPACT ON MICROSOFT

Per today's numbers, Microsoft has a pathetic 7% share of the US
market, down 3 points year over year. Given the hundreds of
millions (billions?) Microsoft has spent on search, it is
impossible to overstate how awful this is. Based on past trends,
it's only going to get worse.

Despite all the advantages one could ever ask for (browser
monopoly, unlimited money and R&D resources, global platform,
etc) Microsoft is going nowhere but down in this market.
Anyone who says differently is hallucinating.

IMPACT ON IACI's ASK

Forget it. Ask has 4.5% share (when you include all of its
third-party syndication sites. The share for the site itself is
about 2%). Ask is going to get squeezed out of the search market.
Its only hope is to focus on a niche or sell itself to Google,
Yahoo, or Microsoft.